Have you ever noticed that people tend to view phenomena as isolated events unrelated to everything else going on? Finance and cyberspace are perfect examples of such a happening. The Internet and social media have been around for about 30 years, and Finance is an age-old institution, a realm where ordinary citizens believe they seldom play.
Most people don't see a connection between their circumstances and the financial world. Sure, they might finance a home or car, and they might use credit cards to pay for a holiday or splurge on a luxury item, and many believe that's the extent of their involvement in Finance.
That attitude proves the urgent need for financial literacy education. Poor financial management and an undefined relationship with money lead consumers to economic insecurity. Setting aside the 'digital' variable, people have had a stake in Finance since immemorial. Now, adding cyberspace into the mix, people - especially young adults need to understand:
- banking and Finance
- commonsense concepts about Finance
- how to manage investments for a secure financial future
- how to start a business with limited funds
Global university student surveys reveal that most undergraduates wish they had learned how to budget and manage money. Many young adults are finding out just how punishing financial blunders can be. These are consumers in tune with technology but ignorant of how money works. Superprof now lays out how financial literacy and technology unite to give this group a more significant economic advantage.
The Future of Banking and Finance
For so long, banks have monopolised money and its usage. The Medici family established the first private bank during the Middle Ages to get around religious and royal controls. A few years later, the Italian state of Genoa set up the first public bank. The concept spread far and wide, giving those institutions control over money and their client's data.
Holding so much power for so long made the banking industry impervious even to regulation and oversight. They had sway over the economy and governments alike, and consumers accepted banking practices as a matter of course. That all came to a halt in 2008 when the global economy crashed.
In the aftermath, everyone - governments, industries and ordinary citizens struggled to recover their financial stability. Meanwhile, a mysterious entity published a paper outlining a financial vehicle independent of banks and governments. Satoshi Nakamoto established blockchain technology by mining the first bitcoin. And then, they disappeared.
Satoshi's white paper ushered in a new era of financial technology - fintech. Fintech had been around for centuries, but ordinary banking clients had little access to it, and Online banking was still optional in 2008. Investment platforms had been around for about ten years, but users tended to be on the older, more affluent side.
Technological advances and growing institutional mistrust mean the future of banking is digital. In China and India, open banking is already a cornerstone of consumer trading; the UK isn't far behind. As financial systems and institutions change to meet today's challenges, being tech-savvy gives you an edge.
Financial Advice For Young Adults
Being tech-savvy, you may be tempted to stop reading this article to investigate open banks and blockchain possibilities. You're welcome to do so, but you'd be more informed if you kept reading. Because knowing about fintech and all you can do with it means nothing if you don't know what to do with it.
That's no reflection on you and your financial acumen, only that a bit of knowledge can be dangerous. How many times have you read about tech-savvy investors going all in on cryptocurrency only to lose their whole stake? It's best to learn first how to lay a secure financial foundation, and that's where financial literacy comes in.
Being financially literate means having the skills and knowledge to make effective, informed decisions about your financial resources. That suggests you have to know what financial resources you have. Budgeting is finding out what you have coming in and going out, and drafting a budget is your first step to financial literacy.
Once you know where your money is going - or, better said, plan how you'll spend it- it's time to set goals. Financial goals may include buying property, starting a family and paying for your children's education. Setting financial goals is the second step to financial literacy, and setting up an emergency fund is your most immediate, most important financial plan.
With a budget established and six months of living expenses in savings, you can work towards your other financial goals. Growing your wealth must be one of them; you do that by investing. We'll discuss your reasons for investing in the next segment more in-depth. We only say that doing so serves your ultimate financial goal.
Few think about their golden years in the prime of life. But that's precisely when you should start planning for your retirement. Financial security matters at every stage of your life, but more so after your working life ends. You are planning for retirement as early as possible tops the list of all the financial advice to follow.
Why Young Adults Should Invest
Ensuring a financially secure retirement is why everyone, including young people, should invest. But it bypasses all of the advantages and benefits early-life investors enjoy, and it also overlooks that learning how to make your money work for you takes a long time. And that, as young investors, we have the time to recover from our financial blunders.
Why invest rather than save? For one, fintech makes investing so much easier and cost-effective. You may have to pay fees to use an investment platform, but you won't have to keep a broker on retainer. Also, you're in charge of your financial future; you can decide what and how much to invest.
Investing allows you to compound your earnings. You got in on a hot stock and netted a handsome return. Rather than cashing out and spending your gains, you should compound them - reinvest them. That way, you'll have more money without removing anything from your budget.
Saving is better than having no financial plan, but it should be limited to short-term financial goals. You won't get a good return on savings because banks pay very little interest. Going on holiday or buying a new telly qualifies as short-term financial goals, so you don't rely on credit. For long-term financial planning, make investing a part of your strategy.
Starting a Business on a Budget
Pandemic lockdowns provoked a surge in online entrepreneurship. People set up podcasts and YouTube channels. Many found success as Tiktok or Instagram influencers. Whether driven by circumstance or intentionally, they launched themselves into business.
Many people dream of going into business for themselves. Often, they discover that regulations are too strict, competition is too fierce and fledgling companies often fail. For most, a regular pay cheque and steady work are more attractive than fulfilling a dream, especially if they have financial obligations like raising a family and paying off debts.
For some, the lack of startup capital makes it impossible to pursue their business aspirations. The government might give them some grant money; perhaps they could take out a loan, too. A financially literate entrepreneur knows that starting a business in debt makes it less likely to succeed.
Those entrepreneurs make starting their businesses one of their financial goals. They don't only plan for their startup costs but also think about how much money they'll need to live on until their business profits. Their financial decisions revolve around keeping their business within their budgets.
They also focus on making their businesses viable. Think about all those influencers and podcasters. None of them (likely) did any market research or feasibility studies, as most business ventures demand. They probably didn't write up a business plan, either.
From a financial perspective, taking such a hit-or-miss approach to business is not recommended. But you can launch yourself into business even if your budget is tight. Let's say you play the guitar or are a yoga instructor. You could become an independent tutor, give music lessons or teach yoga online.
You won't need a big budget because you own your instruments and a computer. Being tech-savvy, you know how to use video chat applications. You can find sheet music and videos online to enhance your lessons. You can advertise your classes for free on social media or a tutoring platform like Superprof.
You won't have to give up your current wages until you start earning enough to live on from your tutoring business. You may even decide to keep your job and run your tutoring business so you can invest the extra income. If you're financially literate and aware of the opportunities technology presents, it's easy to start a business on a budget.
Enjoyed this article? Leave a rating!
Loading...
